It is a sad fact that numbers of pension funds are investing improperly. Their only criterion should be to ensure that pensioners are adequately protected so they receive their pensions. Unfortunately, too many lose sight of that objective.
The dismal record of the Toronto Maple Leafs has brought the matter of investing there recently to the attention of observers. Sports writer Al Coates has stated that about $900-million of the Ontario Teachers’ Pension Fund has been placed in a 58 per cent interest in Maple Leafs Sports and Entertainment. As if that were not a cause of concern, that investment included the American Hockey League Toronto Marlies, the National Basketball Association Toronto Raptors, the Toronto FC soccer club, the Air Canada Centre, the BMO Field soccer stadium, the Ricoh Coliseum, the General Motors Centre arena complex in Oshawa, the premium-cable Leafs TV, the Raptors TV, and the Maple Leafs Square, a commercial complex.
Is it possible for the fund managers to keep abreast of all the foregoing properties? That is very unlikely. Then, in view of the Maple Leafs’ miserable record, the team probably should incur new costs to bring in better players, and a new management around, with financial benefits deferred to the future. A postponement of any dividends to the pension fund will be inevitable. That clearly suggests that this is an injudicious investment for the 271,000 retirees dependent on the Ontario Teachers’ Pension Fund.
It now appears that a few pension fund managers have failed to exercise due diligence before making investments. For instance, funds have been placed in banks heavily weighted in mortgage-backed securities, in trouble because of the decline in house prices. Others have been speculating in hazardous derivatives.
The Canada Pension Plan is investing a portion of our contributions in foreign companies, ignoring the many financial risks that are entailed.
Inasmuch as the Canadian market has outperformed most of the others in the globe, and our dollar has been just about the strongest of any currency, this move is indefensible.
There are other objections as well.
First of all, it is preferable if investment funds were being utilized here. Also, many foreign countries lack our stringent securities regulations, which puts in question earnings reports or balance-sheet information. Then too, are CPP fund managers able to follow non-Canadian companies or business conditions in distant lands?
Beyond doubt, investment managers should focus on their primary mission, to make sure, as far as possible, a safe income for retirees. Certainly many fund managers have been "too cute." Investments in non-domestic corners of the financial world, in sports teams, or companies not observing sound financial practices, should be bypassed.